Unconventional Cash Flow

AAA

DEFINITION of 'Unconventional Cash Flow'

A series of inward and outward cash flows over time in which there is more than one change in the cash flow direction. This contrasts with a conventional cash flow, where there is only one change in cash flow direction. In terms of mathematical notation - where the - sign represents an outflow and + denotes an inflow - an unconventional cash flow would appear as -, +, +, +, -, + or alternatively +, -, -, +, -.


The term is particularly used in discounted cash flow (DCF) analysis. An unconventional cash flow is more difficult to handle in DCF analysis than conventional cash flow since it may have multiple internal rates of return (IRR), depending on the number of changes in cash flow direction.

INVESTOPEDIA EXPLAINS 'Unconventional Cash Flow'

In real-life situations, examples of unconventional cash flows are abundant, especially in large projects where periodic maintenance may involve huge outlays of capital. For example, a large thermal power generation project where cash flows are being projected over a 25-year period may have cash outflows for the first three years during the construction phase, inflows from years four to 15, an outflow in year 16 for scheduled maintenance, followed by inflows until year 25.

RELATED TERMS
  1. Net Present Value - NPV

    The difference between the present value of cash inflows and ...
  2. Conventional Cash Flow

    A series of inward and outward cash flows over time in which ...
  3. Capital Budgeting

    The process in which a business determines whether projects such ...
  4. Cash Flow

    1. A revenue or expense stream that changes a cash account over ...
  5. Discounted Cash Flow - DCF

    A valuation method used to estimate the attractiveness of an ...
  6. Internal Rate Of Return - IRR

    The discount rate often used in capital budgeting that makes ...
Related Articles
  1. Analyze Cash Flow The Easy Way
    Fundamental Analysis

    Analyze Cash Flow The Easy Way

  2. Using DCF In Biotech Valuation
    Investing

    Using DCF In Biotech Valuation

  3. The Essentials Of Corporate Cash Flow ...
    Retirement

    The Essentials Of Corporate Cash Flow ...

  4. Top 3 Pitfalls Of Discounted Cash Flow ...
    Fundamental Analysis

    Top 3 Pitfalls Of Discounted Cash Flow ...

comments powered by Disqus
Hot Definitions
  1. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  3. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center